Transition to a Web-based business

Build your marketing into your product

Let's say that you finally realized it's time to transition from a traditional business to a Web
business. You put it off long enough. But then you read Death Spiral and decided to make your move.

Now the hard part, realizing - though it often goes without saying - that a technology overhaul isn't the only change needed.

The public Internet has created a totally new way of doing
business and for a business to succeed. This is called a Web business. A Web business must be willing
to adopt an entirely new set of assumptions about what it is and what it does.

Technology Model: Running
your software application over the Web changes the most basic rules of the
game: You now operate on the public Internet. The technology
development tools have matured and there are now several standard
platforms that accelerate the development process. In a Web
business, you support all customers from a single implementation.
This is called a “multi-tenant architecture.” You cannot customize
on a customer-by-customer basis. You have to support massive scalability.
You must be more generic, more abstract, and more configurable. You
must enable your customers to change business rules without writing code.
Releases are typically faster, smaller, and more incremental. There
is no such thing as “silver releases” or “gold releases.” There is
just a production release. Everything you do revolves around your
Web application or your Web service. Everyting.

The Customer: In a Web
business, your relationship with the customer changes considerably.
You have the software, the data, the hardware, the roadmap, the pipe and
power, and the data center. You have it all. All they have is
the ability to access your service via a secure login. You are no
longer at an arms length from the customer. You are their business
partner. Your customer’s metrics become your metrics. If they
succeed with your solution, you succeed. If not, you don’t.

Financial Model: The cost
per customer plummets as you achieve scale and will often level off at a
few dollars per user per month. Customer #1 is very expensive –
customer #1,000 is very cheap. This has major implications on
funding, pricing, and strategy. Lower cost opens the door to go down
market. There are still many different revenue models, ranging from
subscription (salesforce.com), to advertising (facebook) to fee-based
(eBay). Revenues tend to be lower overall as a natural consequence of
lower cost, and well-funded competitors will undercut your price because
they have a long-term market share plan versus a short-term revenue plan.

Marketing: In general,
Web companies can do things that traditional companies cannot do.
Some trends are ‘Try it before you buy it,” “freemium,” and “invitation
promotions.” Here is one of the most critical new web marketing truisms: “it is an
inbound world” which means that buyers go to the web first and then come
to you if they find you. This has led to a switch
from the 4 P’s to the 5 A’s. In a web business, an emerging and
successful strategy is to “build your marketing into your product.”

Reach: Once you
are on the Web, you are everywhere that users can get a Web connection to
your service, which is effectively everywhere. If you are on the
Web, you are available online right now in Burundi. This radically
alters the entire notion of distribution.

Features and Functions:
Because of reach and technology and cost and new marketing, you can now
offer sophisticated functionality to a wider range of customers and
markets. This means you have to design with a “peel the onion” design
strategy. The first layer is brain dead easy, but you can peel
back the onion for more and more rich and sophisticated functionality.
“You have to be useful in two minutes, but if you’re not designed to be
useful two years, you won’t last two days.”

Self Service: Web-based
companies often adopt a self-serve strategy as part of the
market-penetration plan. This usually works best by offering a
useful feature subset that a few people can get up and going on their own,
but that will naturally expand from there. Some folks call this the “loss
leader” or the Trojan horse. Self-service versus a full-blown
implementation with professional services is not an “either/or” choice.
The best solutions are designed to do both. Merrill Lynch bought 25,000
users of Salesforce.com, but they started with 25 in one group.

Change Management: If a
company that currently operates on a more traditional, enterprise-style
model, there will be vested interests that line up against the new Web
model. The risk will be expressed as “cannibalizing the business.”
Many folks will balk at the change but give lip service to the web as a
smart move but resist the change. This change requires strong,
committed leadership. This will not happen organically.

Sales Model: The way the
company sells may change considerably. You may have to transition
from an outside sales model with heavy travel and lots of customer face
time to more of an inside model with teleconferencing and limited face
time. Depending on the nature of the sale, there may still be a
major need for enterprise sales talents.

Sales commissions: Depending
on the revenue model, this may change significantly. It may not
change at all. If it changes significantly, then get ready to
perform some serious surgery or start fresh with a new team and new comp
plans.

Partners and Mash-ups: In a
web model, you can more easily incorporate other web based services to
enhance and extend your core offering. Just look at how many
different applications that have popped up to enhance salesforce.com as
add-ons and plug-ins.

Reporting: In a
Web-based model, you can report across customers, users, segments,
markets, etc. You have all the data and all the meta-data. You
can monitor behavior and modify your application accordingly. You
can ask questions you could never even ask before.

Support: With one
instance of the software and with all the data in one database, the
support model gets much leaner and cheaper. You can begin to
automate the support of technical basics. You can implement live
chat. You can get out ahead of known problems. You can focus
your services teams on business impacts like new processes or new
approaches to old problems. You can elevate the very nature of
services to focus on business outcomes rather than break/fix.

Integration: Web
companies integrate via a WSAPI layer built directly into the web application.
All interfaces flow through this one API. Interfaces tend to be more
standardized and abstracted as a result. If designed properly, they
are easier and faster to implement and maintain. Interfaces become
much more of a “do it yourself” approach.

Security: This seems
like a much bigger issue that it turns out to be. If folks can trade
stock via the web, then they can trade ad content over the web.

Channels: Due to the
relatively low cost of implementation, channel partners that rely on
integration revenue and support revenue tend to get cut out of the
picture. Straight up re-sellers, who don’t get involved in the
solution, become a much more attractive option

Implementation: The
technical implementation is often drastically reduced. The emphasis is
usually on “do it yourself.” There is often a need for business
process support that is not focused on technology but on business.
Solution implementations that once took six months now take six weeks, or
six days, or six minutes. Full rollout and adoption can still take years.